Examination of Witnesses (Questions 221-239)
SIR ALAN BUDD
TUESDAY 2 JULY 2002
221. Good morning and I welcome you here today offering you my proper respect as Provost of my college. I would also like to thank you very much for the great trouble to which you have gone to offer to give evidence to the Committee and although it has placed some members of our Committee in appropriate bewilderment, we regard your report as a locus classicus for the whole of this discussion. In view of that, before we start our questions to you, if you feel you would like to make a brief opening statement, we would be very happy to listen to it.
(Sir Alan Budd) Thank you very much indeed, Chairman. I do not want to make a statement but I would like to make one very brief point of clarification, if I may. I wasand I emphasise the "was"Chairman of the Gambling Review Body but that body ceased to exist almost precisely a year ago when we submitted our report and if, for example, I am asked questions about the contents of that report, then I shall do my best to answer them on behalf of the Review Body. If I am asked questions, for example, about the Government's response to that report, then my responses will be personal ones. I do not know what the views of my co-members are as I have not consulted them. So, if we could make that distinction, I think that may be helpful, but that is all I want to say by way of introduction.
Chairman: That was more than helpful, Sir Alan. Thank you very much indeed.
222. We visited Aberdeen a couple of weeks ago and looked at casino licensing and visited a casino. The people we met said that betting and gaming and casinos were in a muddle in the 1960s but, once that had been resolved in the early 1970s, we have had 20 to 30 years of pretty good management of the industry. My question to you is, who directed you to do this review and why did they if people are relatively happy with the status quo?
(Sir Alan Budd) The Home Office directed us to undertake this review; if you remember, it was commissioned by the Home Office. However, our report went to the Department for Culture, Media and Sport. I think they had three reasons why they wanted our study carried out. The first was the form of legislation, a large amount of which had arisen from historical accident. For example, the casino legislation in response to the serious troubles into which the industry got after premature deregulation in the early 1960s and other pieces of legislation about lotteries, Bingo and so on. These were encapsulated in separate Acts of Parliament, very often extremely rigid Acts of Parliament, where it was very difficult to make any changes as time went on. So, I think there was a feeling that it was reasonable to have a tidying-up operation as far as legislation was concerned. That was the first reason. The second reason was that perhaps there had been a change in the spirit of the age, that much of that legislation reflected what one could at least call a somewhat parternalist view of gambling and people's ability to do it. Some of these matters have changed. One remembers the earliest betting shops which were specifically designed to be as discouraging as they possibly could be because this was a rather disreputable activity which people could do if they had to but they should not be encouraged to do it and it should be done in a very restricted environment, and maybe that was no longer appropriate, maybe people's thoughts had moved on. I think that was the second reason. The third reason I think was worries about technical change and these were creating two particular concerns: one was the question of tax revenue and the fear that people were being able to avoid in particular the general betting duty by placing bets off-shore, and the second source of considerable worry which was both a source of regulatory and revenue worry was the provision of gaming on the internet. As you know very well, under the present law, it is illegal for a UK based company operating from the UK to provide games like roulette through the internet because the law states that the person gambling must be present where the game is played. However, there is a considerable amount of this activity going on. I am always slightly surprised when, for example, I switch to the FT.com website to see what the news is that what I mainly see is a flashing sign at the top left-hand corner encouraging me to play roulette. So, there is a lot of it about. The problem was first, was it being properly regulated? They could not be coming from a UK base under UK regulations. Secondly, was revenue being lost because this was an activity being undertaken with an overseas based company? Of course, I am not saying that the overseas based companies are acting illegally or illegitimately, but one can see what the worry was. I think those were the three reasons for setting out on this venture.
223. Let me start with the third one which is the internet betting. ICANN, the organisation that gives out e-mail addresses, is in disarray and the Government are only just getting board members on that. There is not a worldwide body such as, if you like, the IMF, of authority; so how do you think that a British government can, as it were, badge sites that say, "Listen, if you bet on this site, we do not guarantee it but somebody is going to guarantee it" because who guarantees that you will get your money? That is the problem. Your credit card number gets taken, you win £50 and you never get your bet back. How is that going to get resolved by a UK government acting on its own?
224. In addition, if it is an overseas organisation, there must be a real possibility that the credit card details will be misused.
(Sir Alan Budd) I know that Mr Wyatt has a considerable interest in IT matters and knows far more technically about them than I do, but this is the challenge. I do not think anyone is claiming that this worldwide activity can be controlled and, as you know, it is extremely difficult to get international agreement on internet matters as far as I can understand. Child pornography is one of the few where people have seriously tried to do something about it and even that is almost impossibly difficult. I think the best that we are hoping can be done is that while there will continue to be an almost infinite number of uncontrolled sites, it will be possible to set up a badging system either through a portal or through the allocation of some form of certificate to these providers which does say to people that, whatever else is going on here, if you bet with this particular provider of gambling, they have registered with our proposed Gambling Commission; we know about them; we know who they are; the people involved have passed the fit and proper requirements; they are inspected and they are controlled and they have procedures in place which prevent the sort of problem to which the Chairman has drawn attention of handing over credit card numbers. It is a very, very serious challenge. What we are hoping is that that is better, that it is a step forward compared with the present state of more or less complete deregulation.
225. One of the bones of contention of the European players in the internet market is that AOL does not pay any VAT in Europe. So, if you were wise, you would develop all your betting with an AOL account, and you still would not get the VAT which is part of the principle of the three reasons you have given. Do we have an EU directive? How do we get the European countries together? I know that the Italians are doing an investigation rather like ours currently. What is your recommendation?
(Sir Alan Budd) We have not made a recommendation about at what level the regulation should be. In reply to your point on VAT, which is of course a completely valid one, it is that sort of problem which is leading increasingly to the taxing of gross profit margins; so this is something that can be recorded through the accounts of the company involved rather than through the individual transaction. I am not an expert on that type of tax issue. The more that can be done internationally, the better. That must be the case. I think this is an area in which we do have subsidiarity and we can have our own legislation.
226. Just moving on to the resort idea, we have had about half-a-ton of paper from Blackpool telling us that they would like to have an a priori position. I suggested to them that, if I were Gordon Brown, the best thing I could do was organise a 3G-type licence. In other words, if you would like to have a resort licence, bid up front first and then we will make a decision about whether you are good, bad or indifferent and then we will award them. Do you think we can only sustain one resort type institution in Britain or do you think it is possible that you could have one for Wales, one for Scotland, one for Ireland and one for England?
(Sir Alan Budd) In a somewhat cowardly way again, we did not give any answer to that question. We did not like the idea, although this is a matter for public policy, of one particular area being given a monopoly and certainly I would agree with you that, if it were a monopoly, it should not be given, it should be auctioned and this is a matter on which Professor Collins, who has given evidence to you, has written a great deal based on his experience with South Africa. I do not know how many of these casino resorts there could be. That is why I am very happy to leave this to the market and leave this to people to venture their own capital. That is what to me should be done and I hope there will not be too much Government involvement in trying to reach this decision.
227. Finally, I have to declare that I did have breakfast once at the Ritz and talked to the casino ownersI am not sure I put it in the members' interests account but I am sure the breakfast was under £550and the question they raised is that the "high relevance" are largely Malaysian, Singaporean, Chinese and Tais and that what they were asking for was a weekend passport for these people in order that they could come in, bet, and go out again. We do not allow that, Vegas does. What is your view on that?
(Sir Alan Budd) I must admit that I had not even thought about that matter and I am not sure that my views on it would be helpful; it would be embedded in so many matters of public policy. I do not think my views are worth hearing on that particular question.
228. I do not know whether I am asking you this in your capacity as Sir Alan Budd or as the former Chairman of the Commission, but you mentioned in your report originally that you thought that possibly the largest area of national gambling, which is one of the National Lottery, should come under the Gambling Commission. Do you still think that is the case?
(Sir Alan Budd) I do think it is inasmuch as the Regulator is concerned. My views on the Lottery, which are perfectly familiar ones and not mine uniquely, are that they undertake three activities: they promote an activity which raises money for good causes; they regulate this activity; and, every now and then amidst great publicity, they let the contract to people to undertake this activity. To me, these are three entirely different roles and part of their problem has been to find one small group of people who can perform them all. I think it would clarify matters if the regulatory part of that task were taken away from them and given to the Gambling Commission. I feel this particularly strongly if they accede to requests from firms like Camelot to introduce a number of new opportunities to provide money to the Lottery, Lotto and so on, which look increasingly like other forms of gaming.
Michael Fabricant: Your report talked about the whole promotion of gambling and how it should be controlled. Are you comfortable with the way in which the BBC promotes gambling through its promotion of the National Lottery, free of charge I might add?
Mr Bryant: Not free of charge, paid to do so.
Michael Fabricant: What, the BBC are now receiving? They did not originally.
Mr Bryant: They pay for it.
Michael Fabricant: The BBC are paying? That is the point!
Chairman: The BBC pay Camelot.
229. Is that not extraordinary! Not the other way round.
(Sir Alan Budd) I can well sympathise with people who think that is somewhat unfair, that the National Lottery and Lotto get so much free publicity when others do not.
230. But otherwise you do not have a view on whether or not it is right and proper to be promoting gambling in this form even though it be for good causes?
(Sir Alan Budd) Part of our recommendations are that there should be greater freedom to advertise gambling generally; so we certainly would not exclude the National Lottery from that.
231. Can I just take you onto another area. Much of your report was adopted by the Government but some parts were rejected wholesale. One of them was where you suggested that local authorities should have the power to institute bans on types or complete areas of gambling. The Government said that would be wrong and gave various reasons for it. Can you expand a little on why your Committee came to the original view that these sorts of decisions should be devolved to local government?
(Sir Alan Budd) I think you asked me two slightly different questions. We certainly proposed that decisions about premises and so on should be devolved; that is a general recommendation which the Government by and large accept. What they do reject is this particular power to impose a blanket ban and your question is really about this latter particular power.
232. Yes. Rather like in the Welsh valleys on drinking.
(Sir Alan Budd) What we were trying to do here was to recognise a very difficult issue and it was a very difficult issue for us. There are people whose views one would certainly respect who do not like gambling as an activity. They simply do not like it. They think that a society in which everywhere you go there are casinos is not an ideal society. Some parts of the country may wish to say, "We do not want it here." Incidentally, we never suggested that people who already had the power to have betting shops would have them removed, that was not our proposal, but that there would be a part of the country where local people would say, "We do not like it and we are not going to have it." This was concerned with what I subsequently called, "the social environment". It is a very difficult, moral and philosophical issue about whether you should allow people to do that, but that is what we had in mind, that there would be people who wished to exercise this power. As it happens, the Government disagree with us.
233. Were you concerned, when you considered this aspect, about a possible drift of people from one area to another? I am not sure that would necessarily be a problem anywhere. I mentioned the Welsh valleys, which of course has since changed, but of course there was a ban on drinking in parts of Wales on a Sunday and, on the border, there was a drift into England of people who wished to do that. Did you consider that social movement, if you like, between one area and other areas if there were not a national policy on this issue?
(Sir Alan Budd) We did not consider it but I do not think I personally would object to it. Again, part of people's freedom, which we hope they can exercise, is about where they want to live and in what sort of environment they do want to live. What we were worried about was having a significant change in environment imposed on people who thought they had come to a lovely quiet part of the country in which to live. It is a very, very difficult one because we have to balance that against a matter we took very strongly, which was freedom of competition and freedom of entry, and getting that balance right would have been a very difficult matter under this blanket ban proposal.
234. And that comes back to the comments you made to my colleague Derek Wyatt earlier on when you said that you thought that the market should prevail in deciding whether or not there should be one or many large casino resorts like Blackpool.
(Sir Alan Budd) Absolutely.
235. I am all for giving people freedom to gamble if they wish. I do not want to stop people from gambling. I agree with the change in law. I do not gamble very much myself because it just seems like throwing money down the drain. There does not seem to be a lot of skill involved in it. I do not think the majority of people really understand the odds whether it is the National Lottery or horse racing or whatever. Should we educate people?
(Sir Alan Budd) I think it is desirable that people should understand notions of odds. I am not sure I do completely agree with you about what it is that people know or do not know. Take Bingo players, for example, a large group of people who are gambling undoubtedly and on a regular basis. It would be extraordinary if people did not realise that, on a regular basis, they lose. Over the period of a year, they lose. They know that perfectly well and, if you asked them, they would tell you. They may say, "Yes, I lose but I think I am going to win tonight" in some sense, but again they really know that that is not true either. They have a thoroughly enjoyable evening out and they have the excitement that, every now and then, they win a lot of money. I even have a rather complicated theory, of which I have no evidence at all, that they use this as a way of accumulating sums of money for some particular purpose. It may seem a rather costly way of doing it. If they want to have money for a holiday, what they do is play Bingo and, every now and then, out comes the money for a holiday. It is completely irrational but it is a way of turning a stream of money into a lump of money which they might not be able to achieve if they were trying to save it. I am not being agreed with by everybody here, but again this is completely harmless.
236. May I interrupt you. You have chosen the very example which is, for me, the wrong example. I visit Bingo halls occasionally and my constituents have a great time. It is a good evening out. I have no problem with Bingo; I think they really do enjoy themselves. It is the rest of it other than Bingo.
(Sir Alan Budd) I think the same applies. Every now and then, we know there is the small issue of problem gambling but you are saying not, it is the generality. I think the generality know that they lose when they gamble.
237. But the question is, should there be some way in which we educate people? We do not educate people at schools. What the odds are on winning the Lottery is not in the curriculum. I do not want to deter people from sporting activities but we do not educate people, do we?
(Sir Alan Budd) There are a lots of areas in which we do not educate people. I wish a lot more people understood economics and I certainly wish that a lot more people understood finance and what they get into when they undertake financial transactions. This is another part of it. I can very much sympathise with you that one would wish that, as part of the general education, people had understood some basic principles about odds and economics and finance as they would be extremely useful and would remove a great many difficulties into which people later fall.
238. What you are saying is that maybe we should slide it into the curriculum as part of mathematics and life skills?
(Sir Alan Budd) Yes, life skills seems a good expression.
239. Coming back to Bingo, that is one part of gambling that I do understand and people know that they enjoy themselves but know that it is costing them. It is like going to the pictures. You pay to go to the pictures and you know what you are doing. I am not concerned about Bingo, but we may damage the Bingo clubs.
(Sir Alan Budd) I do not think so. There clearly is a risk that people will stop playing Bingo and go to the greater excitements of the games in casinos that will be possible if our proposals are accepted. So far, the groups that go to Bingo and the groups that go to the casinos have been rather distinct. As you say, it is an entirely different sort of experience and I believe that that will continue. I do not think that the Bingo industry, which is of course having a hard time, we know that, will be particularly hit by the adoption of these proposals.